An economic recession generally refers to economic decline characterized by increased levels of unemployment, reduced stock market and a rapid decline in the housing market. It also refers to a rapid drop in a country’s gross domestic product in successive annual quarters. The GDP normally refers to the overall market value of all products that are produced in a country. However, the calculation of GDP is usually based on new products that have been produced. The economic recession is normally contributed by poor governance caused by unethical leadership structures of a country. Therefore, the president or the leader of Federal Reserve is usually held accountable for plunging a country into economic struggles. The economic recession is also caused by high-interest rates which have a negative bearing on the liquidity limits of investment. Inflation is another factor that can contribute to an economic recession. This is because it describes a period of increased prices of goods and the consequently reduced wages.

In 2008, the US government faced a very difficult period of economic recession. In order to avert this predicament, the government implemented fiscal policies so as to ease the economic hardship that Americans were facing. Generally, a fiscal policy refers to the government’s adjustment of its spending levels so as to monitor and control the nation’s economy. In this strategy, the central bank has a greater influence on how funds are spent in the economy. This was until February 2008, that the US government resorted to implement the fiscal policy. This was achieved by implementing the 2008 Economic Stimulus Act. This process involved the government’s contribution of about $152 billion so as to cover the tax rebates of nearly $1200 for each family (Elwell, 2013). This action aimed at injecting more money into the economy so as to influence the spending power of consumers. It also increased the limits of mortgages so as to reduce the consumers’ borrowing levels.

This seemed to be a good action because the unemployment rates had risen to about 9.5% in that period of time. The Federal government went further to implement the second economic stimulus Act that aimed at improving the economic growth through creation of new jobs and reinvesting on the existing employment opportunities. This Act also aimed at improving the government’s spending transparency so as to account for all the expenses that it incurred. This motive was achieved through expanding the federal loan and grants frameworks so that Americans could access capital to venture in new businesses. The federal government also went further to increase the expenditures to about $840 billion so as to cover tax credits for all working households and businesses (Fairlie, 2013).

In order to avert the great economic recession, the federal government resorted to implementing monetary policies. In general, monetary policy refers to the actions taken by the central bank to regulate short-term borrowing and the overall monetary base of the economy so as to remain within the safe economic levels above inflation. However, the federal government was faced with a challenge of not implementing the traditional monetary policy because of the “zero bound” situation. “Zero-bound problem” usually refers to the state in which the interest rates have been lowered to 0%, thus any further reduction in this rates leads to negative investment (O’connor, 2017). In order to counter this problem, the federal government implemented the “Quantitative Easing” strategy (Ball, 2013). This is a process in which the federal government purchases assets from private organizations so as to inject money into the economy. Some of these assets may include the corporate bonds and governments private personal bonds. This action targeted to increase the monetary aspect of the economy thus stimulating the economic growth in return.

The actions taken by the federal government to reduce the economic recession did have some impact in restoring the American economy. However, scholars have criticized the monetary and fiscal policies as a “leaky bucket.” This is because; the impact of these policies could only be felt by few beneficiaries. The new regulatory costs seemed confusing thus disorienting the American people from achieving the desired economic levels. According to the labor force statistics, the demand-side policies reduced the unemployment rates form 9.5% in 2008 to 5.8% in 2014 (Elwell, 2013). This was possible due to the fiscal and monetary policies that the federal government implemented. The real estate household equity has also been revitalized by the implementation of these policies. Survey has shown that the household equity has been boosted to command an $8000 billion figure in the economy. The saving rates have also declined as a result of these demand-side policies. Survey has shown that the saving rates have reduced from 6.1% to 3.8% between 2009 and 2012 (Elwell, 2013).

This statistical data clearly corroborate the impact of demand-side policies on the US economy. This decline in the saving rates tends to improve the consumers spending power thus enhancing economic stability. However, a statistical survey has shown that the fiscal and monetary policies implemented had a slow sustained economic growth. The GDP of United States improved but the pace of growth was slow and uneven. In comparison to other American economic recoveries, the demand-side policies had a little impact of 2.5% annual growth in GDP (Elwell, 2013). Even though the GDP annual growth rate is very low, there is need to appreciate the impact that these policies have on housing, employment, credit conditions and stock market. The manufacturing industry is one major sector that was improved by this economic recovery. The output of the manufacturing sector had improved by 2% according to the 2013 statistical survey. The capacity utilization factor increased from 68% to 78% between 2009 and 2013 (Elwell, 2013). Therefore this improvement in the manufacturing sector has boosted the overall American economy. Generally, demand-side policies have tremendously improved the economy of United States.